#FreeBritney. How is Conservatorship Supposed to Work?

#FreeBritney. How is Conservatorship Supposed to Work?

The recent media attention to pop star, Britney Spears’ conservatorship has painted a dismal picture of arrangements whereby a court-appointed individual has authority to control various aspects of another individual’s finances and personal decisions. Public opinion has been harshly critical of the long-running conservatorship, fueled by Spears’ claims that her conservators are not just overstepping their authority, but that they are abusive and exploitive.

Spears’ pleas to end her conservatorship have caught the attention of not only her fans and the Hollywood elite, but of legal and mental health professionals who are interested in legislative reform to conservatorship arrangements. Conservatorships (called “guardianships” in Wisconsin) are meant to protect vulnerable individuals by placing their decision-making rights in someone else’s hands. If the decision-making authority is in the hands of someone who is abusive or exploitive, an individual under conservatorship is particularly unable to defend themselves given their incapacities. This is where court oversight becomes a necessity.

Importantly, as with most areas of the law, the legal rules differ from state to state. In Wisconsin, there are two arrangements whereby a court-appointed individual controls another person’s finances or their personal/health care. The first arrangement is called “guardianship,” which is an involuntary appointment of a responsible person (called the guardian) for someone who the court has determined cannot care for himself or herself, or who cannot manage his or her own finances (called the ward). The court can appoint a guardian of estate (finances) or a guardian of person, or both. The second arrangement, called “conservatorship” is a voluntary arrangement whereby an individual (called the conservatee) asks the court to appoint a conservator to handle their finances. The voluntary conservatorship can be terminated by the conservatee at any time upon request. In many states, including California where the Spears case is being addressed, a conservatorship is an involuntary procedure.

Guardianship and conservatorships are often used for people who have severe cognitive impairment that renders them substantially incapable of receiving and evaluating information necessary to make appropriate financial, personal and health care decisions. The impairment may be the result of conditions such as dementia, developmental disabilities, mental illness or brain injuries, for instance.

In Wisconsin, guardianship is considered an extreme step used as a last resort and when there are no other less restrictive options. A ward has the right to their own attorney, the right to present medical evidence that their incapacities are not sufficient to require guardianship, and a say in who becomes their guardian. In addition, the court is required to appoint an independent attorney, called a Guardian ad Litem, whose role is to evaluate whether guardianship is in the proposed ward’s best interests.

Wisconsin’s guardianship laws have already been reformed to provide that a ward’s rights are only removed if absolutely necessary. A ward should retain the right to make all decisions he or she is capable of making with appropriate supports in place. The authority of a guardian in Wisconsin only extends to those areas of functioning that a person cannot manage on their own (or on their own with support). It is not intended to be used to protect someone from making “bad” decisions. The court is required to evaluate whether a ward should lose their right to take part in all areas of decision making, or whether the ward should retain rights in certain areas.

Ending a guardianship can be difficult if the ward cannot demonstrate by medical or other evidence that the condition resulting in their incapacity has improved, or that other supports have allowed appropriate functioning to resume, but the law is clear that a ward may request (petition) to end their guardianship. Further, if the law is intended to be less restrictive to the individual, it stands to reason that the conservatorship should be terminated if the individual no longer meets the standards.

In Spears’ case, it is impossible to speculate whether the conservatorship should be terminated without knowing all the facts. Persons under guardianships and conservatorships often have improved functioning in many personal and financial aspects of their lives simply because they are benefiting from assisted decision making, medication management and are free from outside exploitation. Under appropriate review and oversight, the conservatorship or guardianship should nonetheless be terminated if the standard for incapacity is no longer met. This can be a hard pill to swallow for concerned family members who believe – often correctly – that once assisted decision making is over, the dysfunctional behavior will resume.

Either way, it is important to remember that although the case of a famous pop star might bring about legislative reform, when handled properly, conservatorships and guardianships play an important role in protecting elderly, disabled and mentally ill adults from abuse, exploitation and the harm that could result from the inability to make effective decisions. If you are concerned about a loved one with impaired decision making, it is important to talk to an attorney who specializes in guardianship and conservator arrangements regarding appropriate options.

 

The Purpose of a Tax ID Number for an Estate

The Purpose of a Tax ID Number for an Estate

For those who are unfamiliar with estate and probate administration, the need for a separate tax identification number can be confusing. Most people are familiar with the idea that when you file your individual tax returns each year, you need to include your social security number (SSN). Your SSN functions as your “Tax Identification Number” for the Internal Revenue Service (IRS). When an individual passes away however, their SSN can no longer be used to report income earned after their date of death.  Therefore, one of the first tasks of a Personal Representative (or Executor) should be obtaining the federal tax identification number for the estate.

There are many scenarios where the estate continues to earn income after the decedent’s death. It often takes many months to complete the administration of the estate. During that time, the Personal Representative will need to open a bank account to collect the estate’s assets and pay ongoing administration expenses. The Personal Representative will need the tax identification number for the estate in order to open the bank account. The Personal Representative will also need to request that any investment accounts registered under the decedent’s social security number be re-registered in the name of the estate and the estate’s tax identification number. The estate will be earning income, such as interest accruing on the estate’s bank accounts, dividends paid on stocks or other investments, or rental income from tenants, until the assets are fully liquidated or transferred to the beneficiaries.

Under current federal law, if an estate generates more than $600.00 in income, the Personal Representative must file a separate tax return known as a Form 1041. This is a separate return from the decedent’s final individual tax returns, which also must be filed (under the decedent’s individual SSN) to report the income earned in the calendar year prior to the decedent’s date of death. The estate’s income tax return will report only the income earned after date of death.

Applying for a federal tax identification number, also known as an Employer Identification Number (EIN), is a free service offered by the IRS. If you are working with an attorney to settle the estate, you can provide the attorney with an authorization to obtain the number on your behalf. If you obtain the number without the assistance of an attorney, beware of websites on the Internet that charge for this free service. If you are uncertain about obtaining the tax identification number, use caution and seek the advice of a probate attorney.

 

Estate Planning for Second Marriages

Estate Planning for Second Marriages

Although second marriages are more common than ever, developing an estate plan for couples in second marriages can be complicated and challenging, especially when one or both spouses have children from prior relationships as well as an accumulation of wealth and assets that each spouse has brought to the marriage.  As an attorney who settles estates, I often find that spouses in second marriages have not done any planning to address how their assets should be allocated between their surviving spouse and their respective children.  This can lead to disagreement and litigation as the surviving spouse and children of the deceased each attempt to determine the deceased spouse’s intentions.

While there are a variety of reasons individuals and couples procrastinate in completing an estate plan, I have found that many times spouses in second marriages have simply made the incorrect assumption that if they keep the assets that they have each accumulated prior to the marriage in their separate names that they can easily and seamlessly leave assets to their respective children without involving their spouse. Unfortunately, this does not work under Wisconsin’s marital property laws.

Why does planning matter?

Under Wisconsin law, all property of spouses is presumed to be marital, regardless of whether spouses hold assets in their own names or keep their assets physically separate.  This means that spouses are only free to leave half of all marital property to their children, since their spouse is presumed to already own the other half.  This can have disastrous consequences to an intended distribution upon death, particularly when naming the spouse or children on a life insurance policy, retirement account, or other financial account as a direct beneficiary.  These designations do not take into account that both the children and the spouse are each entitled by law to a portion of the assets, regardless of the beneficiary designation.

Fortunately, spouses are free to opt out of marital property law by executing a marital property agreement.  While we often think of marital property agreements as a contract spouses enter into in case they divorce (also called prenuptial agreements), marital property agreements are widely used in estate planning to create a clear plan and obligations about the distribution of property upon death. A marital property agreement coupled with a Will or Trust that spells out the decedent’s intentions is important to make sure that both the surviving spouse and the children of the prior relationship receive those portions of the estate as intended by the decedent.

What if you are in a second marriage but do not have a marital property agreement?

If there is no marital property agreement and a spouse dies without a Will (called dying “intestate”), the assets automatically go to the living spouse. However, in second marriages where there are children from a prior relationship, the children from the prior relationship are entitled to one-half of the deceased spouse’s individual property and all of the deceased spouse’s interest in marital property.  Surviving spouses are often surprised to find that one-half of the property that they brought to the marriage is also a part of the deceased spouse’s estate, and that the children from the prior relationship may be entitled to half of the value.

This is where things can get complicated and why estate planning documents (like marital property agreements, wills and trusts) are so important in second marriages.  After death, disputes commonly arise about property division. This can lead to a lack of trust and damaged relationships among the survivors.  Furthermore, either the spouse or the children may be the only ones to have access to relevant financial information while others don’t. It is important to make sure you have Powers of Attorney for healthcare and finances in place so spouses can name who may make decisions on their behalf in order to avoid spouses and children battling for control through the courts.

While estate planning for couples in second marriages can be more complicated than for first marriages, advanced planning to make sure that your intentions are clear goes a long way to avoid litigation, financial and emotional fallout for all parties involved.

 

Three Considerations for Estate Planning During a Pandemic

Three Considerations for Estate Planning During a Pandemic

The possibility of prolonged sickness or even death from COVID-19 has caused many individuals to feel more urgency to prepare advanced directives and undertake other estate planning.  In addition, the unknown final impact of the economic crisis may raise questions about how things might need to change in current plans that transfer wealth to children, charities or other beneficiaries upon death. With these factors present, there are three options to consider for estate planning.

 

  1. Advanced Directives. While planning for a health care emergency may be easier to complete before a crisis, it is not too late to get your advanced directives in place. Advanced directives are documents that express your wishes and authorize someone else (an agent) to make medical and financial decisions for you in the event you become so ill that you are unable to make your own decisions.  Typically, this involves creating both a Health Care Power of Attorney and a Durable General (Financial) Power of Attorney.  In addition to creating these documents, it is important to speak with your proposed agents about your intentions so that if they do have to make decisions, you know that they will carry out your wishes.  If you already have these documents, review them to ensure they accurately reflect your current wishes and choice of agent(s).  What do your current documents state regarding advanced life support (e.g. ventilators), and are there any changes you would like to make regarding end of life decisions?

 

  1. Make a Will or Trust. As the reality of the pandemic sinks in, people are reaching out to execute Wills or Trusts that they have put off finalizing, or to start estate plans that perhaps should have been put in place long ago. Estate planning is very easy to delay in the best of times, particularly when it involves finalizing some difficult decisions.  Or maybe it is simply a matter of not wanting to face your own mortality.  As the current health crisis reminds us, however, we never know exactly when our estate plans will be needed.  Even if you already have your documents in place, make sure you know where the originals are located, and review them to be sure they still accurately reflect your wishes.  For example, are the named executors in your Will and trustees in your trusts, as well as any successors, still suitable and willing to serve?  Consider whether there have been any major life changes with your beneficiaries or changes in your assets since you completed your plan that would necessitate updating your documents.  Focus on what makes sense to change right now and remember, you can always update your documents in the future.  Finally, make sure that your beneficiary designations on life insurance, retirement accounts and other assets are up to date.

 

  1. Ask Your Attorney for Help. Most legal offices are open, and attorneys are being creative in order to help you complete your estate planning.  We can assist you with getting your estate planning and advanced directives completed. Even if we do not meet in person, we can schedule consultations via telephone or video conference.  Documents are then emailed or mailed to you for your review.  Following your review, it is typical to have another video or phone conference to discuss any revisions or questions, and to discuss the logistics of getting your documents signed.  Wills, trusts and advanced directives all have very specific execution requirements in order to be legal.  Therefore, it is important to work with us to determine which documents in your plan can be signed remotely and which require in person witnessing and notarization.

 

We understand that completing your estate planning during a health crisis can be emotionally taxing; however, now may be the best time to take advantage of addressing your planning while these issues are on your mind.  Our estate planning attorneys are happy to guide you through the process.

 

What Is Divestment Under Medicaid Law?

What Is Divestment Under Medicaid Law?

Divestment is when you or your spouse give away assets belonging to either or both of you and sell assets for less than fair market value. Avoiding or refusing to accept income or assets you are entitled to, such as a pension income or an inheritance would also be divestment.

While individuals and couples often want to get rid of assets so that they can qualify for Medicaid in the event they need long term care, divestment actually results in ineligibility if done within five years of applying for Medicaid. This is referred to as the five-year look-back rule.

If you have divested assets within five years of applying for Medicaid, you will be subject to a divestment penalty period. The penalty period is the amount of time that Medicaid will not cover your long-term care costs in an assisted living facility or nursing home. The length of the penalty period is determined by dividing the value of the assets divested by the average nursing home rate ($287.29 per day as of the writing of this article). The nursing home rate is updated annually. The divestment penalty period begins when you are first eligible to receive Medicaid benefits.

It is important not to confuse the annual tax-free gift exclusion with an exempt transaction for Medicaid purposes. The current annual gift tax exemption is $15,000, meaning an individual may make gifts in the amount of $15,000 to different individuals without having to file a federal gift tax return. Any annual exclusion gifts, however, would still be divestments for Medicaid purposes, and subject to the five-year look back.

Another common misconception regarding divestment is that there is some type of “claw-back” mechanism whereby the individuals who received the divested assets are made to give them back or turn them over to the nursing home. This is simply a myth. Divestment results in ineligibility for Medicaid if done within five years of applying, but no one is forced to give assets back. Ineligibility can have catastrophic results because without having the assets that have been divested, you or your spouse may have no way to pay for care during the penalty period. Proper planning is very important. The rules regarding divestment are complex and you should consult with an attorney familiar with the rules regarding Medicaid and divestment before any disqualifying divestments are made.

 

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